The federal government is being sued by Alabama and Louisiana over the way it is calculating royalties from offshore drilling in the Gulf of Mexico. (AP Photo)

WASHINGTON, D.C. -- A change in how the federal government calculates royalties from offshore drilling in the Gulf of Mexico could cost Alabama at least $7.5 million, according to a lawsuit the state filed to block the change.

Alabama's legal challenge recently was combined with a similar complaint from Louisiana, and the cases are pending in federal court in Washington, D.C.

The U.S. Department of the Interior last year notified the state that it was correcting old errors that caused Alabama to be overpaid royalties of $7.52 million since 1986, and the state has to pay it back.

Alabama officials are disputing the debt and alleging that the changes to how the money is divided were made outside the normal bureaucratic procedures.

"If upheld, this change would afford Mississippi the right to certain ... revenues that have been paid to Alabama over the last 26 years (and that have been long since obligated and expended by the state for public purposes) and that otherwise would be distributed to the state of Alabama in the future," the lawsuit, filed earlier this year by Alabama Attorney General Luther Strange, states.

Alabama's case contends the U.S. Department of Interior's intention to collect the $7.52 million is "an abuse of discretion and is otherwise not in accordance with law."

A spokeswoman for the Alabama attorney general said Wednesday that the Interior Department has given notice it intends to withdraw the demand for repayment.

"If they do in fact withdraw the demand letter, that figure will be zero, unless and until they issue a new demand letter," said Joy Patterson. The state does not have an estimate about the amount of royalties Alabama would lose in the future under the changes.

A section of the Outer Continental Shelf Lands Act requires all "bonuses, rents, royalties and other revenues" from federal leases in certain zones within three nautical miles of shore go into a special account with the U.S. Treasury, and a portion of those go to the Gulf Coast states each month, according to the lawsuit. The Interior Department altered how those zone boundaries are drawn, causing the change to the revenues.

Louisiana's case says the federal government is demanding that state repay $2.81 million.

The Alabama case was filed on behalf of the state, the Alabama State Treasury and the Alabama Department of Conservation and Natural Resources.

The defendants are the top officials with the Interior Department, the Bureau of Ocean Energy Management and the Office of Natural Resources Revenue.

In a response to Alabama's lawsuit, federal government lawyers denied all of the allegations.